Nordic size arguments part III

My exchange with Lyman Stone (me, Stone, me, Stone) has reached a third stage. Unlike most arguments, which just grow at every turn, this one has mercifully gone in the opposite direction. At this point, the only size argument still on the table is about ruralness and whether a lack of ruralness (which is somewhat related to population size, though obviously not inherently) is a thing that makes Nordic success impossible for the US to replicate.

My argument on ruralness is that the Nordics, unlike city-states, do have rather sizeable rural populations and that it is not lack of ruralness that makes them able to do what they do. These are countries with big landmasses and many far flung villages. As evidence for this, I presented this graph showing the percent of each country’s population that lives in rural areas.

Source: World Bank

Here’s Stone’s response:

Matt’s reply is, no, look, the Nordics have non-zero rural populations! Matt claims that all he was saying is, by having non-zero rural populations, the Nordics aren’t juking their stats.

But that’s misleading. What matters isn’t “pure city state” but “degree of city state-ness.” So 0% rural vs. 3% rural, or 6%, or 12%, or 24%, etc.

Matt gave one comparison: the U.S. That’s neat. But let’s look at some other examples.

Of course, I wasn’t saying that merely by being non-zero, the countries weren’t doing Singapore-style stats-juking. Rather I was saying that they have pretty hefty rural populations, which is admittedly a vague characterization, but recall initially my whole point in even bringing this up was to say that these are real countries with real landmasses and people, not just glorified city-states.

But Stone is right that what matters here is not whether each country gets over some line of “pretty hefty” or not. What matters is degree of ruralness. And when you look at the degree of ruralness, what you find is that they are not all that different from the US. Norway is slightly above. Finland is 1.5 points behind. Sweden is 4 points behind. Denmark is 6 points behind. I find it hard to believe that this slightly smaller degree of lesser ruralness is the key to anything.

This is especially hard to believe when you consider the history of these countries. The Nordic welfare states were generally developed by red-green coalitions, i.e. coalitions of parties representing the industrial proletarians (red) and parties representing rural farmers (green). The Nordic agrarian parties had a big role to play in welfare state development because, when these welfare states actually developed, the Nordic countries were far more rural than they are today. At the end of so-called golden age of Nordic social democracy (1970), every single Nordic country was more rural than the US is today. If ruralness is an impediment to good and sustainable welfare state development, then the Nordics are an exception to that rule.

Stone goes on to compare Nordic ruralness to the ruralness of non-US countries, but that’s obviously off topic to the question at hand (and as I said up top, I like arguments to pare down not expand as they progress).

“Institutions” Quibbling

As I stated in my prior piece, my only interest in all of this is to confirm, through the discourse of all places, that the US could adopt Nordic institutions and have it actually be a sustainable and sound economic model. I’ve italicized “economic” because I want to emphasize that my inquiry here is about economic possibility, not political possibility, not cultural possibility, not any other kind of possibility. The question at hand is: if you could “fiat” (as we used to say back in my debate days) Nordic institutions into existence in the US, would they work similarly or would things fall apart because of something economically peculiar about the US (in this debate, its large size).

Stone’s response on this question involves him using a much broader notion of “institutions” than I am intending.

Matt Bruenig seems to think by “institutions” I mean “political preferences.” But I don’t. I’m using it in the way that, well, everybody who studies development uses the word. So, “I believe it is immoral to bribe cops” is not an institution. But “In practice, basically nobody ever tries to bribe a cop” absolutely is an institution. “I believe, regardless of race or religion, everyone in my country should be entitled to the same benefits” is not an institution. But, “In practice, basically nobody discriminates based on race or religion” could be.

Institutions are not directly correlated with beliefs. People with very non-racist beliefs may uphold racist institutions, and vice-versa. We have very limited understanding of how institutions form (which is what much of my post was about).

This is not what I mean by institutions and it is not what I thought Stone meant by institutions. What I mean by institutions is something extremely narrow. I am talking about the specific structures of the economy.

In Finland, they have a welfare administration called Kela and a tax administration called Vero. Kela and Vero are institutions. Kela and Vero collect taxes and provide welfare payments and services according to certain rules established by law. These rules are also institutions.

What I am trying to determine is if the US had its versions of Kela (SSA) and Vero (IRS) operate the same way as they do in Finland (collecting the same or similar taxes, providing the same or similar benefits and services), would it work or not? And by “work,” I mean “there is no technical economic reason why it would fail.” By “work” I do not mean “there is no cultural, political, or other reason why it would fail.”

Stone’s discussion of institutions is just another way for him to talk about underlying noneconomic reasons why Nordic people put in place good governments rather than bad governments. That is not the debate I am looking to have at this moment (if forced into it, I’d say their deep Marxist turns in the early 20th century explain it, but that’s not what the debate is about).

I followed up the “institutions” (my meaning) discussion on Twitter and, as far as I can tell, Stone does not actually disagree with the narrow point that Nordic “institutions” (my meaning) could economically work in the US. All he has to say is that, if they were implemented here, the specific political and cultural context of the country would end up dismantling them.

Strangely for an economist, Stone really likes to avoid the abstract economic question in favor of grander theorizing about historical contexts and such. I always thought that was a bad leftist habit, but apparently it’s not only a leftist thing.